Borek also suggests selling investment property if you have a high income, and have a loss from the property that is being carried forward, rather than being used. "If you sell the property, and terminate that activity, you can unlock that loss," he says.

Fire sale in the Hamptons, anyone?

4. Going Public

For a founder working toward an I.P.O., exercising some strategy before shares blossom into millions can make a big difference in tax payments.

"Two years out is the opportune time to plan before going public," says Greg Horning, director of SC&H Financial Advisors Inc., in Sparks, Maryland. Shares sold on the day the company goes public—commonly done—generate hefty (but avoidable) capital gains, he says.

Horning's solution? Trusts.

Taking a small percentage of the company's prepublic shares, and placing them in a tax shelter can protect that capital from an immediate tax bite.

How does this work? Say an early startup is valued at $1 million. A founder gives 1 percent of the company to each of his children in the form of a trust. While these shares are technically worth $10,000, they're likely valued less than that because as nonpublicly traded stock, they're harder to sell.

That means the founder could transfer even more shares as long as the value stays south of $12,000 and not spark gift taxes.

Two years later, the startup goes public and is suddenly worth $100 million. That 1 percent is now worth $1 million. And when the trust sells the shares, it pays capital-gains tax too—but only on the profit.

For a founder who's too late to the trust-planning stage, and sells off shares, Horning suggests at least prepaying state income taxes so these can be deducted on the federal tax return. "It's not a big dent on the taxes, but it's something," he says.

5. Walking With Vested Stock

That C.E.O. leaving with millions in vested stock needs a good financial expert on hand. The first thing to assess, says Ernst & Young's Elda Di Re, is which stocks have the highest cost basis—and the least profit—and which have the lowest.

"Sell the ones with the highest, which will generate a lower tax," she says. "And think about putting those with the most profit in a charitable remainder trust, or give them away outright."

A big advantage to this kind of trust is that it generates an immediate tax deduction from the value of the stocks used to fund it, plus it creates an annual annuity for the C.E.O., who then pays capital-gains tax only when he draws this income—and not on the full amount.

Ultimately, each scenario brings its own unique tax footprint. So, in the end, what is the best strategy for high earners?

"They need to pick the best preparer they can afford," says Alvin S. Bailey, a tax attorney specializing in I.R.S. issues, who spent 27 years working with the agency's chief counsel. "This can prevent problems in the long run."

Enough said.

---